Choosing the Best Alt Coins to Buy

There are so many alt coins around now, competing for space in the digital currency market which Bitcoin has forged, that it can all be a bit bewildering. How do you know which one(s) to buy? Whether you are looking for an investment, a community project to get involved in, or a functional internet currency to start using, you are presented with such a wide array of choices, with new ones popping up all the time, that sorting the good from the bad can become a nearly impossible task.

I personally believe that some alt coins will have a very bright future indeed. When Bitcoin was created there were no established examples of a successful digital currency that could be used, and because of this it was put together in a somewhat naïve way. Many alt coins have used the lessons and built on the experience provided by Bitcoin to offer real advantages, whilst others have built upon the foundations it provides will extended functionality and new features. Others don't even try to compete with the increasingly mass market coin, but instead are carving out a place for themselves within a specific niche. Even if Bitcoin remains the number one digital currency, which it probably will because of its first mover advantage and its loyal army of fans who love the idealism and romantic revolutionary spirit and image of the coin, I think there will always be plenty of space for successful alternatives which fulfil a specific need or take over a particular niche.

But it is clear that not all alt coins will succeed. Many of the current crop will eventually wilt and die without ever breaking out beyond a small hardcore of users. In order to make the job of sifting through all the new coins and picking out those with a good chance of succeeding over the long term a bit easier, I've put together a short and simple checklist of things to look out for:

  • User Facing Innovation: Quite a lot of the alt coins which are around at the moment do not have any unique user-facing innovation. What I mean by 'user-facing' is an innovation or unique feature which is relevant to regular users. Many coins just have a slightly different mining algorithm but no other unique features – this can generate initial interest from professional miners, who then promote the coin to get people who they can sell their mined coins to, but is unlikely to drive significant adoption by regular people. The exception to this is, of course, the development of strongly ASIC resistant algorithms which are attempting to make mining feasible for regular users over the long term. For me personally, some kind of unique feature or innovation which sets a coin apart from the crowd and which has the potential to appeal to regular people rather than just professional miners (who are mostly just interested in selling their coins to pay for mining equipment and take their profit) is the most important thing to look for.
  • An Appealing 'Brand': Brands aren't just the preserve of corporate giants. Anything can make a brand, including the ideals and aims of a coin, the logos and imagery used to represent it, and so on. For example, being environmentally friendly like Earthcoin, or supporting open source development like Devcoin, contributes to the development of a strong brand.
  • Honest creators and developers: It is important that the creators and developers behind a coin are in it for the long term and really believe in their coin, and aren't just in it for a quick profit. Large unexplained pre-mines or very quiet launch announcements followed by loud publicity a while afterwards are danger signs to look out for.
  • A good community: The success of a digital currency is primarily community driven. Of course all new coins will start off with a small community, so you shouldn't discount an alt coin just because of this, but you can look at how the community operates and the type of people who are getting involved in it to get an idea of a coin's chances of success. For example, if a coin is trying to focus on creating financial services and investment instruments then it will need to get lots of investors with money behind them on-board – a community full of unemployed people looking to get rich without doing any work or having any real skills will not take it very far; on the other hand, a tipping currency will need lots of people who are more interesting in community spirit, giving generously, and just having fun rather than getting rich, in order for it to become successful.
  • Current Value: Of course you should never buy anything without having some idea of whether or not it is good value, so this is my final point. To judge value you can't just look at the price of a coin, because there is a massive difference in the number of currency units between different coins. You should at least try to look at the current market capitalization (price * number of coins on market) and the total future capitalization (price * total number of future coins) and think about what the total potential value of a coin could be, in order to judge whether a coin is currently under-valued, fairly valued, or hideously over-valued.

These five simple check points should help you to pick the winners from the losers – which is worth doing whether you are looking for an investment or a fun project to get involved with, because everybody likes to be involved with something winning.

Categories: E-Currency | Cryptocurrency

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